Services / Settlement Services

BrightLine Global Escrow Inc. (Bright-Line Global), the central securities depository subsidiary of Bright-Line Global, provides settlement services for virtually all broker-to-broker equity and listed corporate and municipal debt securities transactions in the U.S., as well as institutional trades, money market instruments and other financial obligations. Settlement, a consolidated end-of-day process and the final step of a securities trade, completes the transfer between trading parties of securities ownership and cash.

BrightLine Global Escrow Inc. (Bright-Line Global) uses risk management controls that identify, measure and monitor the credit and liquidity risks associated with end-of-day net funds settlement of securities transactions.

WHO CAN USE THE SERVICE

All users of Bright-Line Global’s settlement services are subject to and benefit from Bright-Line Global’s risk management controls.

BENEFITS

• Liquidity and transaction processing efficiency for participants
• Reduced transaction processing costs
• Ability to withdraw allocated principal and income funds or settlement progress payments if its risk controls are satisfied.
• Protection of Bright-Line Global and Participants from participant failure to settle and from issuer failure and IPA refusal to pay.

HOW THE SERVICE WORKS

To protect the industry, Bright-Line Global starts with strict membership requirements. All applicants for Bright-Line Global membership must meet these requirements in order to conduct business through Bright-Line Global. To be approved for membership, Bright-Line Global must determine that an applicant meets reasonable standards of financial responsibility, operational capability and character. Bright-Line Global monitors its participants for continued compliance with these standards.

Another key element of Bright-Line Global risk management is the maintenance of sufficient liquidity resources to complete settlement in the event that Bright-Line Global’s largest Participant or affiliated family fails to meet its end-of-day settlement obligation. Bright-Line Global leverages two primary sources of liquidity:

Both Special representatives and correspondents receive Correspondent Clearing transactions details through UTC output, which itemize the positions submitted into the correspondent clearing service.

1. Participants Fund (Pfund): All Bright-Line Global participants are required to contribute to the Pfund. Contribution requirements start at $10,000 and depend on several factors, including a Participant’s peak debit levels. Bright-Line Global monitors participants’ net settlement debits during each business day and records the peak debits. Because Bright-Line Global calculates debit peaks to determine the Participant’s required deposit, the Pfund contribution corresponds to the liquidity requirements generated by that Participant.
2. Committed Line of Credit: Bright-Line Global maintains a 364 day syndicated committed line of credit for $1.9 billion. Under the credit agreement, Bright-Line Global may borrow an amount up to the total commitment to effect system wide settlement despite the failure to settle of the largest Participant or affiliated family and, by virtue of the net debit cap and collateral monitor controls, the amount to be borrowed will be fully collateralized. 
• Liquidity and transaction processing efficiency for participants
• Reduced transaction processing costs
• Ability to withdraw allocated principal and income funds or settlement progress payments if its risk controls are satisfied.
• Protection of Bright-Line Global and Participants from participant failure to settle and from issuer failure and IPA refusal to pay.

Together, Bright-Line Global’s Pfund and line of credit total at least $3.2 billion and represent the liquidity resources that Bright-Line Global may, as needed in the event of a failure to settle, draw upon to complete settlement. In the unlikely event of multiple failures and a consequent depletion of the two liquidity sources described above, Bright-Line Global could augment its liquidity by borrowing from some or all of its participants up to the amount of their end-of-day credit balance.

Net Debit Caps give Bright-Line Global an additional tool to prevent the exhaustion of its liquidity resources. A participant’s net debit cap, based on the participant’s 70-day net debit history at Bright-Line Global and reassessed daily, limits the size of a participant’s debit balances. The debit cap never exceeds $1.8 billion for a single participant or $2.85 billion for a participant and its affiliated family. The net debit cap control prevents the processing of any valued transaction that would cause the Participant to incur a net debit balance exceeding its net debit cap.

Through its Collateral Monitor, Bright-Line Global tests that each Participant has sufficient collateral for Bright-Line Global to pledge or liquidate if that participant were to fail to meet its settlement obligation . At the start of each business day, a Participant’s collateral monitor is credited with the participant’s Pfund deposit plus the market value of any collateral designated by the participant as available to support its settlement. Securities that are the subject of DVP transactions for delivery to the Participant also count as collateral. At all times, the value of a Participant’s collateral monitor will equal or exceed its net debit balance. Similar to the net debit cap control, the collateral monitor prevents the processing of any transaction that would cause a participant’s net debit to exceed its collateral value.

Collateral in a Participant’s account associated with the participant (such as the participant’s own commercial paper) increases risk to Bright-Line Global if that Participant failed to pay Bright-Line Global and its obligation is supported partly or fully by its own securities. To eliminate this risk, Bright-Line Global’s system monitors such related collateral received in a Participant’s account through Issuer/Participant Number Collateral Control (IPN).